Insolvency shake up
21 May 2020: The much-anticipated (at least to those of us in the industry) Corporate Insolvency and Governance Bill has just been released and is expected to progress through Parliament shortly. The Bill has been designed to help the economy recover, protect jobs, and give companies the best chance of survival.
This Bill is the biggest shake up to the insolvency legislation in two decades and the main takeaways from an insolvency perspective are these:-
This has been introduced in order to give struggling companies some breathing space to seek professional advice and formulate a rescue plan. During the moratoium period, legal action cannot be taken against a company without court approval.
Ipso facto (termination) clauses
These clauses will prevent suppliers from stopping or threatening to stop supplying businesses going through an insolvency or restructuring process. Although there will be a safeguard to ensure that continuing supplies are paid for, if the supply causes hardship to the business, suppliers will be relieved of this requirement should the court agree.
Companies which are viable but experiencing difficulties will be able to restructure under a new procedure. The courts will sanction this procedure based on whether it is fair, equitable and in the interests of creditors.
Suspension of wrongful trading
Whilst this suspension is in place, liquidators and administrators will not be able to take action against directors of insolvent companies for losses to creditors incurred as a result of continued trading.
Statutory demands and winding up petitions
The threat of legal action to recover debt incurred as a result of the Covid-19 pandemic will be removed by the voiding of statutory demands issued in respect of that debt. This is meant to encourage debtors and creditors to reach a sensible and pragmatic solution between themselves.
As insolvency practitioners we will be monitoring the Bill’s passage through Parliament with interest. In the meantime, we are available to provide advice and assistance on a confidential, impartial and no-obligation basis so please do not hesitate to contact any of the BRI management team to discuss and issues you might currently be experiencing.